July 24, 2024

Judge in FTX bankruptcy case rejects motion to remove elite NYC lawyers

Judge in FTX bankruptcy case rejects motion to remove elite NYC lawyers

New York

One of America’s elite white-collar legislation corporations has emerged as a contentious figure in the intricate FTX saga.

A decide dominated that the bankrupt crypto system could retain Sullivan & Cromwell as lawful counsel, overruling objections from FTX clients who accused the company of conflicts of fascination. g

Delaware individual bankruptcy Choose John Dorsey dismissed an crisis movement to delay proceedings, expressing on Thursday there is “no proof of any true conflict below.”

The attorneys for two FTX clients experienced filed the movement, alleging Sullivan & Cromwell hadn’t been clear in its disclosures about dollars it had earned from the now-bankrupt system. Then FTX’s former leading attorney supported the motion in a court docket filing, which included additional allegations that 1 of his previous colleagues improperly funneled FTX enterprise to Sullivan & Cromwell.

But Dorsey dominated that “a probable conflict is not for each se disqualifying.”

In truth, Dorsey said, in any significant individual bankruptcy circumstance “it would be almost impossible” for the debtors’ counsel to have no overlapping company. The existence of legal professionals from other firms ameliorates any prospective conflict on Sullivan & Cromwell’s part as all those legal professionals can phase in if essential, he reported.

Sullivan & Cromwell did disclose very last month that prior to FTX’s collapse, it experienced acquired about $8.5 million from the crypto business for authorized perform given that 2021.

However, a attorney for the objectors — FTX prospects who collectively dropped obtain to $400,000 when the platform collapsed in November — cited “grave concerns” about the regulation firm’s “lack of transparency in its necessary disclosures and its ability to lead an objective investigation into the FTX Group’s pre-petition functions.”

In a individual filing to the court Thursday night, FTX’s previous top law firm Daniel Friedberg sought to back again the customers’ motion — while also lobbing allegations of inappropriate perform by a former colleague at FTX who had previously been a partner at Sullivan & Cromwell. Friedberg alleged that that law firm funneled organization to Sullivan & Cromwell, hoping to curry favor with the company to which he hoped to eventually return.

Dorsey dismissed Friedberg’s declaration: “Frankly, it’s, it is whole of hearsay, innuendo, speculation, rumors,” he said. “It’s absolutely not one thing I would allow to be released into evidence in any celebration.”

The US Trustee, which signifies the Office of Justice in court, dropped its have objection to the firm’s retention on Friday in mild of extra disclosures that had been submitted clarifying opportunity conflicts.

A law firm for Sullivan & Cromwell told the court docket that “the disclosure that we have filed, in my encounter, is the most fulsome disclosure that I have at any time found any debtor’s counsel make… We have long gone down to extraordinarily concentrations of detail.”

A representative for Sullivan & Cromwell declined to comment past what was explained in court Friday.

Before this thirty day period, a group of US senators also raised objections to Sullivan & Cromwell’s participation in the FTX bankruptcy. In a letter to the choose, Senators John Hickenlooper, Thom Tillis, Elizabeth Warren and Cynthia Lummis urged him to appoint an impartial examiner to oversee the investigation into FTX’s collapse, citing obvious conflicts of curiosity.

“The regulation business of Sullivan & Cromwell suggested FTX for yrs primary up to its collapse and one particular of its associates even served as FTX’s typical counsel,” they wrote. “As authorized counsel is normally central to significant economical scandals…it is correctly acceptable to have problems about the impartiality and way that Sullivan & Cromwell will tactic any investigation of FTX with.”

FTX’s founder Sam Bankman-Fried, who has pleaded not guilty to several counts of fraud and conspiracy expenses associated to his crypto empire, likewise has sought to elevate suspicion close to the firm’s involvement.

He wrote on January 12 that “S&C was 1 of FTX International’s two major legislation companies prior to individual bankruptcy.” He explained the firm as one of the “primary parties” that was “strong-arming” him to step down as CEO of FTX. Bankman-Fried resigned as CEO at the exact same time the company filed for bankruptcy. He was changed by a restructuring specialist, John J. Ray III, who is overseeing the company’s personal bankruptcy.